A.I.M. Users Bulletin Board

[ls7550]

By the way, heard on TV that the bookies in England were way off on this one. They had the odds at 80% the UK would stay in the EU.

Hi TooFuzzy

Bookies are more interested in balancing their books than making actual predictions. They tune to money flows rather than expected outcomes.

Betting is much more relaxed/entertained over here. For example you can bet $1 per Dow point or whatever which is equivalent to buying $17,000 of Dow exposure (assuming Dow was 17000 at the time), and all gains are exempt from taxes (losses can't be offset either). Similar to our Gilts, the Treasury can't be bothered to tax as wins by one and matching losses by another is zero sum that would cost the Treasury to collect/repay/manage (only price changes are non taxed, income/interest is taxed at your marginal rate as that's obviously a net positive revenue flow for the Treasury). Bets as such can be continual, with no actual final outcome, you in effect bet on the change in betting prices, buying (or selling) to open, selling (or buying) to close. Other bets do have a end point, such as football matches, or a referendum - but you can still trade into/out of bets prior to that end date/time. A bit like Traded Options.

Back in February when the EU referendum date was announced betting was 1/3 for IN, 3/1 for OUT, compared to Polls which indicated a much closer outcome, near 50/50. A obvious bet was to $9 on IN at 1/3 and $3 on OUT at 3/1 so no matter what $12 outlay, $12 returned ... and then wait for the OUT odds to shorten, as the 50/50 Polls indicated would likely happen. At 2/1 for OUT for instance you could short close the positions and have banked a 8% profit.

So relatively more money was being heavily weighted towards the IN ($9) compared to OUT ($3) which kept the bookies books relatively high for IN.

Closer to the referendum and that was still evident, as you say suggesting around a 80% chance of IN, 20% chance of OUT. Which the financial markets followed, perhaps believing that money speaks and was perhaps a better indicator of likely outcome than the Polls. In practice however the Polls were the more accurate predictor (remained around 50/50 right up to the referendum date). Final actual outcome was close to 48/52 for IN/OUT.

Most people believed that IN (Remain) to be a near dead cert. The marginal OUT actual outcome has been quite a severe shock for many. Some even voted for OUT believing that to be unlikely, I guess as a form of protest vote, ending in tears when their choice of vote actually came to fruition.

We have a petition system over here where if 100,000 'sign' the petition then Parliament has to consider/discuss the petition. There's one rather silly one asking for a 2nd referendum that in just a few days has accumulated 2.6 million signatures https://petition.parliament.uk/petitions/131215 such is the anger/upset of the Brexit (OUT) win. Which is causing those who did want Brexit to get angry .... lots of division/upset over here. Pretty difficult as IN and EU laws in effect trump UK laws and there's conflict of interest as the EU is rapidly converging towards a single state/single currency (Euro), that's in direct competition with the UK Pound. Such that London and the Pound are at risk (EU laws supremacy). Free movement of peoples is also causing upset, high unemployment area migration into other countries causing lower wages/conditions. In the US wages/house prices etc are more balanced nationally, and a common single (primary) language - such that migration is a relatively low factor. In the EU there's considerable disparity in wages/house prices and high levels of migration is causing discontent and a rise in extremism. The EU have P'd off many Brits for being so unmoving when considering the UK. Cameron went to negotiate a deal for the UK and came back with what many consider to be nothing (tokens). I guess because France and Germany (and Luxembourg) have eyes on poaching lucrative London financials trade and as-is (pre referendum) have (had) the UK under its control sufficiently enough to impose such. Better offers to protect the Pound/London and the referendum outcome more likely would have been 80/20 for Remain.

The EU "President" (Jean-Claude-Junker) who has a popular viewed YouTube over here -

is from Luxembourg (so his home country benefits if Brexit) - a small country the size of the town of Sheffield in the UK, has been totally rude and unpresidential, making matters worse. Frankly I have no idea where it will all end up. Cameron as part of the referendum campaign suggested Brexit could lead to a European war ... some over here would be all too ready to launch nukes towards Luxembourg/EU ! Others are looking towards more a communist type solution (aided by Obama's involvement/Putin's distancing during the campaign stage). France has Marine Le Pen National Front popularity ... interesting times. Much of it is tension/anger/upset. More likely it will all blow over/work out, politicians however are tending to fuel the fire. Fortunately we've had a rather lousy cool/wet summer so far over here, had temperatures been more average/high things might have been far worse. I suspect that come our 2020 General Elections we'll likely see a far left government majority. Corbyn (current leader of the opposition (Labour/red)) has relatively extreme history and if/when he gets in has plans for a great wealth redistribution which has massive amounts of support over here (revolt against capitalism). Personally I've been shifting investments mostly into Australia and US holdings, moving only relatively small amounts back during the dips in Pound/Stocks.